Wall Street up as recovery hopes overshadow virus worries
Stocks surged on Wall Street Tuesday, driving the S&P 500 and Dow Jones Industrial Average to their highest levels in nearly three months as optimism over the reopening of the economy overshadowed lingering worries about the coronavirus pandemic.
The S&P 500 was up 1.8% to 3,007 points. It’s the first time the benchmark index has been above the 3,000-point mark since March 5. The Dow crossed the 25,000-point threshold for the first time since March 10, before widespread business shutdowns aimed at slowing the spread of the outbreak sent the U.S. economy into a sharp skid.
The post-Memorial Day rally followed a strong rise in global markets as more nations push to open their economies. Financials, technology and industrial stocks powered much of the broad gains. Airlines were big winners as traders welcomed data showing a pickup in air travel during the holiday weekend.
“That was one of the concerns of the recovery, that people would be hesitant to resume their lives,” said Willie Delwiche, investment strategist at Baird. “This is a stock market that’s looking ahead to the economy improving and maybe moving beyond the lockdown mentality...Two weeks from now, if you have a spike in cases, then everyone will reconsider things.”
The S&P 500 was coming off a solid week and is on track for a second-straight month of gains. The index remains down about 11% from its all-time high in February. The Dow climbed 673 points, or 2.8%, to 25,140. The Nasdaq rose 0.7% and the Russell 2000 index of small companies gained 3.3%.
Fears of a crushing recession due to the coronavirus sent the S&P 500 into a skid of more than 30% in March. Hopes for a relatively quick rebound and unprecedented moves by the Federal Reserve and Congress to stem the economic pain drove a historic rebound for stocks in April and have bolstered optimism that the market won’t return to the depths seen two months ago.
Fresh optimism about the development of potential vaccines for COVID-19 have also helped lift stocks. Investors are keenly focused on the process of reopening the U.S. economy, which is likely to accelerate over the summer. Concerns remain that reopening businesses could lead to another surge in infections, potentially hobbling efforts to get the nation’s battered economy growing again.
A couple of economic reports gave traders more reason for encouragement Tuesday. The Commerce Department said sales of new U.S. homes inched up 0.6% last month, a surprising gain that hints at the relative health of many consumers. Over the past 12 months, sales are down 6.2%. Meanwhile, the Conference Board said its index of consumer confidence ticked up in May to 86.6 from a reading of 85.7 in April. The index is still down sharply from February’s reading, when it climbed to 130.7.
Optimism over the prospect that consumers will be eager and able to spend money as more businesses open helped push travel-related stocks sharply higher Tuesday. Norwegian Cruise Line climbed 14.6%, Royal Caribbean jumped 15.6% and Carnival rose 13.8%.
Airline stocks soared on indications that air travel is recovering from mid-April lows, although it remains down sharply from pre-pandemic levels. The Transportation Security Administration said about 340,000 people passed through airport checkpoints on Memorial Day. That’s 86.4% less than last year’s holiday, but it’s the smallest percentage drop in U.S. air travel since March 22.
UBS upgraded Southwest Airlines to “buy” from “neutral” on better prospects for a recovery in domestic travel. Shares of all six leading U.S. carriers — Delta, American, United, Southwest, Alaska and JetBlue -- were up between 13% and 16%.
The banking sector led Wall Street’s rally. JPMorgan jumped 8.2% and Bank of America climbed 8%.
Bond yields were broadly higher, in another sign of optimism. The yield on the 10-year Treasury note, a benchmark for interest rates on many consumer loans, rose to 0.70% from 0.66% late Friday.
Oil prices were mixed. Benchmark U.S. crude oil was up 2.2% to $33.99 a barrel. Brent crude oil, the international standard, slipped 0.6% to $36.51 a barrel.
Reassuring comments by the head of China’s central bank helped spur buying in global markets Tuesday. France’s CAC 40 climbed 1.5%, while Germany’s DAX gained 1%. The FTSE 100 in Britain, which was closed on Monday, rose 1.2%. Asian markets closed higher.
In another confidence-boosting development on Wall Street, the New York Stock Exchange reopened its trading floor Tuesday for the first time since mid-March, when it closed due to the coronavirus outbreak.
New York Gov. Andrew Cuomo rang the opening bell at the NYSE, which allowed a limited number of traders back to the floor. It required that traders adhere to social distancing guidelines and wear masks.
“The message of the NYSE reopening is symbolic not only for our community and our country, but it is for the globe,” said Jonathan Corpina, senior managing partner at Meridian Equity Partners and one of the NYSE floor traders. “It’s showing that we are ready to reopen our economy and reopen our country and move things in the right direction.”